EMPLOYMENT AGREEMENT

standing in the business community as Group President.  The Executive shall not be entitled to any compensation other than the compensation provided for herein for serving during the Term of Employment in any other office or position of the Company or any of its subsidiaries or affiliates, unless the Board of Directors of the Company or the appropriate committee thereof shall specifically approve such additional compensation.

(c)            The Executive shall be a full-time employee of the Company and shall exclusively devote all his business time and efforts faithfully and competently to the Company and shall diligently perform to the best of his ability all of the duties required of him as Group President, and in the other positions or offices of the Company or its subsidiaries or affiliates assigned to him hereunder.  Notwithstanding the foregoing provisions of this section, the Executive may serve as a non-management director of such business corporations (or in a like capacity in other for-profit or not-for-profit organizations) as the Board of Directors, Chairman of the Board or President and Chief Executive Officer of the Company may approve, such approval not to be unreasonably withheld.

3.              (a)  Base Salary.   As compensation for all services to be rendered pursuant to this Agreement and as payment for the rights and interests granted by Executive hereunder, the Company shall pay or cause any of its subsidiaries to pay the Executive a base salary of $83,333.33 per month (which equates to $1,000,000 per annum) (the “Base Salary”).  All amounts of Base Salary provided for hereunder shall be payable in accordance with the regular payroll policies of the Company in effect from time to time.

(b)            Incentive Bonus Compensation.   The Compensation Committee has established for the Executive annual opportunities under the Company’s Executive Annual Incentive Plan or any subsequent Bonus Plan for executives that is approved by the stockholders of the Company (the “Bonus Plan”) with aggregate target payouts of $1,750,000 in respect of the First Contract Year, $1,900,000 in respect of the Second Contract Year and $2,000,000 in respect of the Third Contract Year, subject to the terms and conditions of the Bonus Plan, which are incorporated herein by reference.

(c)            Deferral.   The Executive may elect to defer payment of all or any part of his incentive bonus compensation payable in accordance with Section 3(b) hereof in respect of any Contract Year during the Term of Employment, by giving to the Company written notice thereof, on or before March 31 of such Contract Year (or such earlier date as may be necessary to comply with the applicable tax laws and regulations).  Additionally, in the event that in respect of any fiscal year of the Company any amount of Base Salary, any amount payable under the Bonus Plan or any other amount payable to the Executive hereunder or otherwise shall, either alone or in combination with other amounts payable hereunder or otherwise, result in the payment by the Company of any amount that shall not be currently deductible by it pursuant to the provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), or like or successor provisions (a “Non-Deductible Amount”), the Company may elect to defer the payment of the Non-Deductible Amount. Any amounts, so deferred, either by election of the Executive or by election of the Company shall be credited to a bookkeeping account in the name of the Executive as of the date scheduled for payment hereunder. Such amounts shall be credited with interest as of each June 30 during the term of deferral, compounded annually, at a rate per annum, equal to the annual rate of interest announced by Citibank, N.A. in New York, New York as its base rate in effect on such June 30, but in no event shall such rate exceed 9%.  The entire amount credited to such bookkeeping account shall be paid to the Executive on a date to be chosen by the Company, but in no event

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later than 90 days after the termination of the Executive’s employment with the Company, unless the Executive requests prior to termination of his employment from the Company to continue the deferral of such payments until a later date or dates and the Company agrees to such request.  The Company, in its sole discretion, may provide an investment facility for all or a portion of such deferred amounts, but shall not be required to do so.

4.              (a)    Stock Options.   The Stock Plan Subcommittee of the Compensation Committee has approved the grant to the Executive of options to purchase no fewer than 100,000 shares of the Company’s Class A Common Stock (“Stock Options”) under the Fiscal 2002 Share Incentive Plan (the “Share Incentive Plan”) and subject to the provisions of Section 6(i) below in respect of the First Contract Year. Such grant shall be made at such time during the Contract Year determined by Stock Plan Subcommittee.  The option grant is subject to the terms and conditions of the Share Incentive Plan (or applicable successor plan), which are incorporated herein by reference.  The terms of the options shall be set forth in a separate grant letter approved by the Stock Plan Subcommittee of the Compensation Committee.

(b)    Equity-Based Compensation .  In respect of the Second and Third Contract Years, the Company shall recommend to the Stock Plan Subcommittee of the Compensation Committee that the Executive be awarded under the terms and conditions of the Fiscal 2002 Share Incentive Plan (which are incorporated herein by reference) or successor plan and subject to the provisions of Section 6(i) below Equity-Based Compensation awards in accordance with the policies and procedures of the Company as in effect from time to time for its Executive Officers. The terms of such Equity-Based Compensation awards shall be set forth in a separate grant letter approved by the Stock Plan Subcommittee of the Compensation Committee.  The recommended equity-based compensation awards shall be of an equivalent value to a grant of stock option with respect to 100,000 shares of the Company’s Class A Common Stock determined in accordance with procedures generally utilized by the Company for its financial reporting at the time of grant.

(c)    Certain Conditions .  Executive acknowledges and agrees that any grant of Stock Options or other Equity-Based Compensation otherwise provided for in this Section 4 shall be effective as provided herein only to the extent permitted by the Share Incentive Plan, and this Agreement shall not obligate the Company to adopt any successor plan providing for the grant of Stock Options (or other Equity-Based Compensation).  If authority over the Company’s equity compensation programs is changed from the Stock Plan Subcommittee to the Compensation Committee (or other committee), then after such change, references herein to the Stock Plan Subcommittee shall be to the appropriate Committee.

5.              Benefits.

(a)            Standard Benefits.   During the Term of Employment, the Executive shall be entitled to (i) participate in any and all benefit programs and arrangements now in effect and hereinafter adopted and made generally available by the Company to its senior officers, including but not limited to the Estee Lauder Companies 401(k) Savings Plan (the “401(k) Savings Plan”), the Estee Lauder Companies Retirement Growth Account Plan (the “Qualified Plan”), the related Estee Lauder Inc. Benefit Restoration Plan (the “Non-Qualified Plan”), contributory and non-contributory Company welfare and benefit plans, disability plans, and medical, death benefit and life insurance plans for which the Executive shall be eligible, or may become eligible during the Term of Employment; (ii) participate in the Company’s automobile program now in effect and hereinafter adopted and generally made available by the Company

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to its senior officers and, in accordance with such program, may elect to be provided with an automobile having an acquisition value of up to $50,000; and (iii) paid vacations during each year of the Term of Employment in accordance with the policies and procedures of the Company as in effect from time to time for its senior officers.  The prior services of the Executive with the Company or its subsidiaries shall be recognized for all purposes related to employment benefit plans of the Company, in accordance with the provisions of such plans.

(b)            Perquisite Reimbursement; Financial Counseling .  The Company shall reimburse the Executive the actual expense incurred by him in connection with his professional standing, in accordance with the guidelines set out in the Company’s executive perquisite program.  In no event shall the gross amount of such reimbursements be greater than $15,000 in respect of any fiscal year during the Term of Employment.  Additionally, the Executive will reimburse the Executive for up to $5,000 per year in financial counseling services.  The Executive acknowledges that participation in such programs will result in the receipt by him of additional taxable income.

(c)            Expenses.   The Company agrees to reimburse the Executive for all reasonable and necessary travel (including first class air fare), business entertainment and other business out-of-pocket expenses incurred or expended by him in connection with the performance of his duties hereunder upon presentation of proper expense statements or vouchers or such other supporting information as the Company may reasonably require of the Executive.

(d)            Spousal Travel . The Executive may upon prior approval of the President and Chief Executive Officer or his designee arrange for his spouse to accompany him on business related travel itineraries, on a reasonable basis, at Company expense.  In addition, during each full year of employment, the Executive will be provided first class air fare for two round trips from New York to Paris and back to New York for himself, his wife and his children.

(e)            Executive Term Life Insurance .  During the Term of Employment, the Company shall continue to pay premiums on the existing term life insurance policy.

6.              Termination.

(a)            Permanent Disability.   In the event of the “permanent disability” (as hereinafter defined) of the Executive during the Term of Employment, the Company shall have the right, upon written notice to the Executive, to terminate the Executive’s employment hereunder, effective upon the giving of such notice (or such later date as shall be specified in such notice).  In the event of such termination, the Company shall have no further obligations hereunder, except that the Executive shall be entitled (i) to receive any amounts or benefits to which the Executive may otherwise have been entitled prior to the effective date of termination; (ii) to be paid his Base Salary under Section 3(a) hereof for a period of one (1) year from the effective date of termination; provided , however , that the Company shall only be required to pay that amount of the Executive’s Base Salary which shall not be covered by pension benefits or long-term disability payments, if any, to the Executive under any Company plan or arrangement and (iii) to receive a pro-rata portion of the annual bonus that the Executive would have been entitled to receive had he remained in employment through the end of the Contract Year during which the termination due to permanent disability occurred.  In addition, upon termination for permanent disability, the Executive shall continue to participate in any and all pension, insurance and other benefit plans and programs of the Company during the period the Executive is continuing to receive his Base Salary in accordance with this Section 6(a).

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Thereafter, the Executive’s rights to participate in such programs and plans, or to receive similar coverage, if any, shall be as determined under such programs; provided , however , that, except as otherwise provided in this Section 6(a), the Company will have no further obligations under Sections 3(b) and 4 hereof.  For purposes of this Section 6(a), “permanent disability” means any disability as defined under the Company’s applicable disability insurance policy or, if no such policy is available, any physical or mental disability or incapacity that renders the Executive incapable of performing the services required of him in accordance with his obligations under Section 2 hereof for a period of six (6) consecutive months or for shorter periods aggregating six (6) months during any twelve-month period.

(b)            Death .  In the event of the death of the Executive during the Term of Employment, this Agreement shall automatically terminate.  In the event of such termination the Company shall have no further obligations hereunder, except to pay the Executive’s beneficiary or legal representative (i) for a period of one (1) year from the date of his death, the Executive’s Base Salary as established under Section 3(a) hereof as of the date of his death; (ii) (A) bonus compensation earned but not paid under Section 3(b) hereof that relates to any Contract Year ending prior to the date of his death and (B) a one-time payment equal to fifty percent (50%) of the average of actual annual bonuses paid or payable during the Term of Employment in accordance with Section 3(b) hereof, except that if the Executive dies during the First Contract Year, the sum of $875,000; and (iii) any other amounts to which the Executive otherwise would have been entitled to hereunder prior to the date of his death; provided , however , that, except as otherwise provided in this Section 6(b), the Company will have no further obligations under Sections 3(b) hereof.

(c)            Termination Without Cause.   The Company shall have the right, upon one hundred eighty (180) days’ prior written notice given to the Executive, to terminate the Executive’s employment for